I have set a picture from the Apple User menu for one user and set a photo from the
desktop for the other user. The strange thing is, the computer changes the users pictures both to the desktop picture..... Have restarted, logged out and in etc.....Any guesses??

Go into Address book in your own account, and make sure there is an entry there called [YOUR NAME] with a User icon opposite it -- that icon beside it is super-important, so let us know if it is not there.

Now drag a new photo (anything, doesn't matter right now) into the "well" where the picture of you should go (or take a picture if you like using the built-in iSight camera). It should have the caption "me" on it if you've done this correctly.

Now go to "accounts" and see if the same picture is there for your own account. Is it?